As ofJune 30, 2019, the Company had working capital of$29.6 millioncompared to working capital of$21.6 millionatDecember 31, 2018.

For the 6-month period, the Company acquired 6 stores, one inDenver, CO,Palm Springs, CA,Reno, NV, andManchester, NHand two inMaineand opened new store locations inTulsa, OKandBrewer, ME.

AppointedBob Nardelli, former CEO of Home Depot, as Senior Strategic Advisor.

Darren Lampert, Co-Founder and CEO, said, “the Company’s second quarter financial results reflect our company’s continued focus on revenue growth and EBITDA expansion. We improved the financial performance of the Company in all areas. Revenue was up 172% year over year to$19.5 million. Adjusted EBITDA was approximately$1.8 million, with adjusted EPS at a positive$.06. Our same store sales were up 23% versus Q2 2018. Gross profit margins increased 5.7 basis points, to 29.9%. Gross profit dollars were$5.8 millionfor the 2ndquarter 2019, an increase of$4.1 millionversus the same period year over year. With our significant top and bottom-line growth, we were able to reduce our store operating expenses by 13% and our corporate overhead by over 42 % as a percentage of our revenue. The Company continues its rollout of its new ERP platform, adding ourNorthern California,Michigan,Maine,OklahomaandRhode Islandstores to our ERP system in 2019. The GrowGen ERP platform is designed to lower costs, improve departmental productivity, and provides forecasting and reporting tools. All of our current store operations will be on our ERP platform by the end of 2019.

The newly acquired stores and new store openings are all performing better than expected and have been successfully integrated into the operations of the overall company. The Company has nearly$18.0 millionin cash, which will allow the Company to continue to grow at a rate of 100% year over year. We appointedBob Nardelli, former CEO of Home Depot, as Senior Strategic Advisor, who will provide advice on matters relating to strategic partnerships, supply chain, merchandise, branding, distribution, new product introductions, pricing and channel selection. We have a strong pipeline of new acquisition targets set to close in the second half of 2019. The Company is also investing in an aggressive new store opening plan, working with a National real estate company to locate properties in all major cities in the U.S. We are raising our revenue guidance for 2019 revenue to$65M–70Mand non-GAAP adjusted EBITDA of$.14–$.18per share, based on 34.8 million shares outstanding.”

Key Performance Metrics:

Three Months EndedJune 30,

2019

2018

Sales

100.0%

100.0%

Cost of sales

70.1%

75.8%

Gross profit

29.9%

24.2%

Operating expenses

Store operations

14.0%

16.1%

G and A, excluding non-cash

7.0%

11.0%

Total operating expenses, excludingnon-cash

21%

27.1%

Income (loss) from operations

8.9%

(2.9)%

Other income (expense), non-cash

.3%

.1%

Adjusted EBITDA

9.2%

(2.8)%

Summary of Q2 2019 and Q2 2018 results:

ThreeMonthsEndedJune 30,2019

ThreeMonthsEndedJune 30,2018

%Variance

%Variance

Net revenue

$

19,483,383

$

7,152,299

$

12,331,084

172%

Cost of goods sold

13,663,173

5,423,069

8,240,104

152%

Gross profit

5,820,210

1,729,230

4,090,980

237%

Operating expenses

4,646,499

2,351,207

2,295,292

98%

Operating income (loss)

1,173,711

(621,977)

1,795,688

289%

Other income (expense)

(111,711)

(307,982)

196,271

(64)%

Net income (loss)

$

1,062,000

$

(929,959)

$

1,991,959

214%

Net revenue for the three months endedJune 30, 2019increased approximately$12.3 million, or 172%, to approximately$19.5 million, compared to approximately$7.2 millionfor the three months endedJune 30, 2018. The increase in revenues in 2019 was primarily due to the addition of 14 new stores opened or acquired afterApril 1, 2018, and the new e-commerce site acquired inmid-September 2018. The 14 new stores and the new e-commerce web site contributed$12.7 millionin revenue for the quarter endedJune 30, 2019.

Cost of goods sold for the three months endedJune 30, 2019increased approximately$8.2 million, or 152%, to approximately$13.7 million, as compared to approximately$5.4 millionfor the three months endedJune 30, 2018. The increase in cost of goods sold was primarily due to the 172% increase in sales comparing the three months endedJune 30, 2019to the three months endedJune 30, 2018. The increase in cost of goods sold is directly attributable to the increase in the number of stores.

Gross profit was approximately$5.8 millionfor the three months endedJune 30, 2019, compared to approximately$1.7 millionfor the three months endedJune 30, 2018, an increase of approximately$4.1 millionor 237%. Gross profit as a percentage of sales was 29.9% for the three months endedJune 30, 2019, compared to 24.2% for the three months endedJune 30, 2018. The increase in the gross profit margin percentage is due to (1) reduced pricing from vendors as a result of our increasing purchasing from those vendors, (2) the sales of product acquired in a large bulk purchase in Q1 2019 at a substantial discount.

Store operating costs as a percentage of sales were 14% for the three months endedJune 30, 2019, compared to 16.1% for the three months endedJune 30, 2018. Store operating costs were positively impacted by the acquisitions of new stores in 2018 and 2019 which have lower percentage of operating costs to revenues due to their larger size and higher volume. The net impact was lower store operating costs as a percentage of revenues.

Corporate overhead, comprised of general and administrative costs, share based compensation, depreciation and amortization and corporate salaries, was 9.8% of revenue for the three months endedJune 30, 2019and 16.8% for the three months endedJune 30, 2018

Corporate overhead, excluding non-cash share-based compensation, depreciation and amortization, was 7% of revenues for the three months endedJune 30, 2019and 11% for the three months endedJune 30, 2018.

The Company currently continues to focus on nine (9) markets and the new e-commerce site noted below and the growth opportunities that exist in each market. We continue to focus on new store acquisitions, proprietary products and the continued development of our online and Amazon sales.

Sales by Market

ThreeMonthsEnded

June 30,

2019

ThreeMonthsEndedJune 30,

2018

Variance

Colorado

$

3,915,664

$

1,894,862

$

2,020,802

California

5,048,307

1,132,389

3,915,918

Rhode Island

2,056,590

1,373,568

683,022

Michigan

1,610,803

825,015

785,788

Nevada

952,344

391,513

560,831

Washington

350,244

334,211

16,033

Oklahoma

2,506,769

–

2,506,769

Maine/New Hampshire

1,562,578

–

1,562,578

E-commerce

1,036,334

–

1,036,334

Closed/consolidated locations

443,750

1,200,741

(756,991)

Total revenues

$

19,483,383

$

7,152,299

12,331,084

The Company continues its rollout of its new ERP solution, which it started in Q4 2018, adding ourNorthern California,Michigan,Maine,OklahomaandRhode Islandstores to our ERP system in 2019. The ERP system is designed to improve departmental productivity and effectiveness and provides forecasting and reporting tools.

Balance Sheet Summary

As ofJune 30, 2019, we had working capital of approximately$29.6 million, compared to working capital of approximately$21.6 millionas ofDecember 31, 2018, an increase of approximately$8 million. The increase in working capital fromDecember 31, 2018toJune 30, 2019was due primarily to 1) proceeds from the sales of common stock and exercise of warrants totaling$13.1 millionduring the six months endedJune 30, 2019offset by 2) the application of a new accounting standard related to accounting for operating leases which resulted in a$1.6 millionincrease in current liabilities. AtJune 30, 2019, we had cash and cash equivalents of approximately$17.9 million. As of the date of this filing, we believe that existing cash and cash equivalents are sufficient to fund existing operations for the next twelve months.

Use of Non-GAAP Financial Information

The Company believes that the presentation of results excluding certain items in “Adjusted EBITDA,” such as non-cash equity compensation charges, provides meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting periods. The Company uses these non-GAAP measures for internal planning and reporting purposes. These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or net income per share prepared in accordance with generally accepted accounting principles.

Set forth below is a reconciliation of Adjusted EBITDA to net income (loss):

GrowGen owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 23 stores, which include 5 locations inColorado, 5 locations inCalifornia, 2 locations inNevada, 1 location inWashington, 3 locations inMichigan, 1 location inRhode Island, 2 locations inOklahoma, 1 inNew Hampshireand 3 locations inMaine. GrowGen also operates an online superstore for cultivators, located at HeavyGardens.com. GrowGen carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers. Our mission is to own and operate GrowGeneration branded stores in all the major states in the U.S. andCanada. Management estimates that roughly 1,000 hydroponic stores are in operation in the U.S. By 2020 the market is estimated to reach over$23 billionwith a compound annual growth.

Forward Looking Statements:

This press release may include predictions, estimates or other information that might be considered forward-looking within the meaning of applicable securities laws. While these forward-looking statements represent our current judgments, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this release. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. When used herein, words such as “look forward,” “believe,” “continue,” “building,” or variations of such words and similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us herein are often discussed in filings we make with the United States Securities and Exchange Commission, available at:www.sec.gov, and on our website, at:www.growgeneration.com.

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